Exhibit 99.1
Asset Purchase Agreement dated December 6,
2005 by and among Phase III Medical,
Inc., Phase III Medical Holding Company,
and NeoStem, Inc.
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BY AND AMONG
PHASE III MEDICAL, INC.,
PHASE III MEDICAL HOLDING COMPANY
AND
NEOSTEM, INC.
ARTICLE I PURCHASE AND SALE, PURCHASE PRICE
AND LOCK-UPS, LEGENDS ON
CERTIFICATES, ASSUMED LIABILITIES, RETAINED
ASSETS, TAXES......................
1.1 Purchase and Sale of the
Purchased Assets............................
1.2 Payment of the Purchase
Price........................................
1.3 Assumed
Liabilities..................................................
1.4 Retained
Assets......................................................
1.5 Transfer Taxes
ARTICLE II DEFINITIONS;
INTERPRETATION.........................................
2.1
Definitions..........................................................
2.2
Interpretation.......................................................
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF SELLER...........................
3.1 Status of Seller;
Enforceability; Conflicts; Consents................
3.2 Ownership of
Seller..................................................
3.3 Financial
Statements.................................................
3.4 Undisclosed
Liabilities..............................................
3.5 Title to
Properties..................................................
3.6 Real
Property........................................................
3.7 Equipment and
Improvements...........................................
3.8
Contracts............................................................
3.9 Equity
Interests.....................................................
3.10 Intellectual
Property................................................
3.11 Required Assets; Sufficiency
of Assets...............................
3.12 Personnel Identification and
Compensation............................
3.13 Existing Employment Related
Contracts................................
3.14 Compliance with
Laws.................................................
3.15 Claims and Legal
Proceedings.........................................
3.16 Employee Benefit
Plans...............................................
3.17 Tax
Matters..........................................................
3.18
Consents.............................................................
3.19 Licenses and
Permits.................................................
3.20 Regulatory
Compliance................................................
3.21 Conduct of Business Since
Most Recent Balance Sheet Date.............
3.22 Broker's or Consultant's
Fees........................................
3.23
Disclosure...........................................................
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ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND COMPANY.............
4.1
Status...............................................................
4.2
Authority............................................................
4.3 Due
Authorization....................................................
4.4
Enforceability.......................................................
4.5
Consents.............................................................
4.6 Broker's or Consultant's
Fees........................................
4.7
Capitalization.......................................................
ARTICLE V PRE-CLOSING
COVENANTS................................................
5.1 Ordinary
Conduct.....................................................
5.2 Right of Inspection; Access
to Books and Personnel...................
5.3 Notification of Material
Events......................................
5.4 Supplemental
Disclosures.............................................
5.5
Exclusivity..........................................................
5.6
Publicity............................................................
5.7 Power of Attorney; Right of
Endorsement, Etc.........................
5.8 Covenants Not to Compete,
Solicit or Disparage.......................
5.9
Confidentiality......................................................
5.10 Certain
Funds........................................................
5.11 Performance of
Contracts.............................................
5.12
Employees............................................................
5.13 Assumed
Contracts....................................................
5.14 Change of Corporate
Name.............................................
5.15 Certain
Warrants.....................................................
ARTICLE VI CONDITIONS PRECEDENT TO
PURCHASER'S AND COMPANY'S OBLIGATIONS.......
6.1 Obligations to be Satisfied
on or Prior to Closing Date..............
6.2 Procedure for Failure to
Satisfy Conditions..........................
ARTICLE VII CONDITIONS PRECEDENT TO
SELLER'S OBLIGATIONS.......................
7.1 Obligations to Be Satisfied
on or Prior to Closing Date..............
7.2 Procedure for Failure to
Satisfy Conditions..........................
ARTICLE VIII
CLOSING...........................................................
8.1 Time and
Place.......................................................
8.2 Closing
Transactions.................................................
8.3 Deliveries by
Seller.................................................
8.4 Deliveries by Purchaser and
Company..................................
ARTICLE IX OTHER
AGREEMENTS....................................................
9.1 Further
Assurances...................................................
9.2 Access to Records After
Closing......................................
9.3 Collection of
Receivables............................................
9.4 Third Party Consents and
Confidentiality Obligations.................
9.5 Registration of
Shares...............................................
ARTICLE X
INDEMNIFICATION......................................................
10.1 Survival of Representations,
Warranties and Indemnity................
10.2 Indemnification by
Seller............................................
10.3 Indemnification by Purchaser
and Company.............................
10.4 Limits on
Indemnification............................................
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10.5 Cross-indemnification for
Broker's, Consultant's or Finder's Fees....
10.6 Procedure for
Indemnification........................................
10.7
Payment..............................................................
10.8 Limited Recourse against
Seller and its shareholders.................
10.9 Reduction for Insurance and
Taxes....................................
10.10 Remedies
Exclusive...................................................
10.11 No Consequential
Damages.............................................
10.12
Escrow...............................................................
10.13 Bulk
Sales...........................................................
ARTICLE XI TERMINATION.
11.1 Rights to
Terminate..................................................
11.2 Effects of
Termination...............................................
MISCELLANEOUS
PROVISIONS.......................................................
12.1
Notices..............................................................
12.2
Assignment...........................................................
12.3 Benefit of the
Agreement.............................................
12.4 Exhibits and
Schedules...............................................
12.5
Headings.............................................................
12.6 Entire
Agreement.....................................................
12.7 Modifications and
Waivers............................................
12.8
Counterparts.........................................................
12.9
Severability.........................................................
12.10 GOVERNING
LAW........................................................
12.11
Expenses.............................................................
12.12 JURISDICTION; WAIVER OF JURY
TRIAL; VENUE............................
EXHIBITS
Exhibit A
Escrow Agreement
SCHEDULES
Schedule
1.4
Retained Assets
Schedule
2.1 Assumed
Liabilities and Assumed Contracts
Schedule
3.1
Status of Seller
Schedule
3.2
Ownership
Schedule
3.4
Undisclosed Liabilities
Schedule
3.5
Title to Properties
Schedule
3.6 Real
Property
Schedule
3.8
Contracts
Schedule
3.9
Equity Interests
Schedule
3.10
Intellectual Property
Schedule
3.12 Personnel
Identification and Compensation
Schedule
3.13 Existing
Employment Related Contracts
Schedule 3.14
Compliance
with Laws
Schedule
3.15
Litigation
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Schedule
3.16
Employee Benefit Plans
Schedule
3.18
Consents
Schedule
3.19
Licenses and Permits
Schedule
3.20
Regulatory Compliance
Schedule
3.22
Conduct of Business
Schedule
5.12
Employees
Schedule
6.1(d) Consents
obtained
Schedule
6.1(j)
Individuals subject to non-competition and
non-solicitation
agreements
Schedule
6.1(k)
Individuals subject to employment agreements and terms
Schedule
6.1(l)
Individuals subject to confidentiality agreements
Schedule
6.1(n)
Investment Representations
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of
December
6, 2005, is entered into by and among Phase
III Medical, Inc., a Delaware
corporation (the "Company"), Phase III
Medical Holding Company, a Delaware
corporation and wholly-owned subsidiary of
the Company ("Purchaser") and
NeoStem, Inc., a California corporation
("Seller").
RECITALS
WHEREAS,
Seller is engaged in the business of adult stem cell collection
and storage (the "Business"); and
WHEREAS,
Seller desires to sell substantially all of the assets relating
to the Business to Purchaser and Purchaser
desires to purchase substantially all
of the assets relating to the Business from
Seller, all on the terms set forth
herein; and
WHEREAS,
each term defined in this Agreement shall have the meaning
ascribed to it in Article II;
NOW, THEREFORE,
in consideration of the mutual agreements and covenants
contained herein, and for other good and
valuable consideration, the receipt and
sufficiency of which hereby are
acknowledged, Purchaser, Company and Seller
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE, PURCHASE PRICE
AND LOCK-UPS, ASSUMED LIABILITIES, RETAINED
ASSETS, TAXES
1.1 Purchase and
Sale of the Purchased Assets. Subject to the terms and
conditions of this Agreement, at the
Closing, Seller shall sell, assign, convey,
transfer and deliver to Purchaser and
Purchaser shall purchase from Seller the
Purchased Assets, free and clear of all
Liens, claims, options, charges,
encumbrances and restrictions of any kind,
other than those Liens set forth on
Schedule 3.5 hereto.
1.2
Payment of the Purchase Price; Lock-ups; Legends on
Certificates.
(a) Subject to the terms and conditions of this Agreement,
including
those set forth in this Section 1.2,
Purchaser shall, at the Closing, pay or
cause to be paid the purchase price (the
"Purchase Price") consisting of
5,000,000 newly issued shares of Company
Common Stock (the "Consideration" or
the "Shares"). At the Closing, 60% of the
Shares shall be deposited with the
Escrow Agent pursuant to the terms of the
Escrow Agreement and 40% of the Shares
shall be delivered to Seller, and subject
to the terms and conditions of this
Agreement, including those set forth in
this Section 1.2, Seller shall be
entitled to immediately distribute such 40%
of the Shares to its shareholders.
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(b) None of the Shares shall be distributed by Seller to any
shareholder unless and until such
shareholder agrees to be subject to the
limitations on transfer to which Seller
agrees to be subject as set forth in
Section 1.2(c) below and to have the Shares
bear the legends as set forth in
Section 1.2(d) below. Notwithstanding the
foregoing limitations, subject to the
other provisions of this Agreement,
including the Escrow Agreement, the
restrictions contained in Section 1.2(c)
below will not prevent any Transfer (as
defined below) of any or all of the Shares
by a shareholder, either during such
shareholder's lifetime or on such
shareholder's death, by gift, will or
intestate succession, or by judicial
decree, to such shareholder's "family
members" or to trusts, family limited
partnerships and similar entities
primarily for the benefit of such
shareholder or such shareholder's "family
members"; provided, however, that in each
and any such event it shall be a
condition to the Transfer that the
transferee execute an agreement stating that
the transferee is receiving and holding the
Shares subject to the provisions
hereof, and other than to return the Shares
to the former ownership, there shall
be no further Transfer of the Shares except
in accordance with this Agreement.
For purposes of this sub-paragraph, "family
member" shall mean spouse, lineal
descendants (including adopted children),
stepchildren, father, mother, brother
or sister of the transferor or of the
transferor's spouse. Also notwithstanding
the foregoing limitations, subject to the
provisions of this Agreement,
including the Escrow Agreement, in the
event such shareholder is an entity
rather than an individual, the provisions
hereof will not prevent any Transfer
of any or all of the Shares to the
shareholders of such entity, if it is a
corporation, to the members of such entity,
if it is a limited liability
company, or to the partners in such entity,
if it is a partnership; provided,
however, that in each and any such event it
shall be a condition to the Transfer
that the transferee execute an agreement
stating that the transferee is
receiving and holding the Shares subject to
the provisions hereof, and other
than to return the Shares to the former
ownership, there shall be no further
Transfer of the Shares except in accordance
with this Agreement.
(c) During the Restricted Period (as defined below) Seller shall
not
(i) sell or offer or contract to sell or
offer, grant any option or warrant for
the sale of, assign, transfer, pledge,
hypothecate, or otherwise encumber or
dispose of (all being referred to as a
"Transfer") any legal or beneficial
interest in any of the Shares; or (ii)
enter into any swap or any other
agreement or any transaction that
transfers, in whole or in part, directly or
indirectly, the economic consequence of
ownership of any of the Shares, whether
such swap transaction is to be settled by
delivery of any Shares or other
securities of any person, in cash or
otherwise. Notwithstanding anything to the
contrary set forth in this Agreement or the
Escrow Agreement, Seller shall be
entitled to pledge (or otherwise use as
collateral) the Shares in connection
with the satisfaction of any
indemnification claims under this Agreement or any
third party liabilities or obligations owed
by Seller, provided, however, that
(i) any Shares covered by the Escrow
Agreement shall remain subject to the
Escrow Agreement for the term thereof, (ii)
all Shares so pledged shall remain
subject to the restrictions on Transfer
during the Restricted Period, (iii)
during the term of the Escrow Agreement, no
third party shall ever have a
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priority in the Shares that is greater than
Purchaser's and Company's, and (iv)
any Transfer by the pledgee(s) or any
transferee(s) of such pledged Shares
during the twelve months following the
Restricted Period shall comply with the
volume restrictions contained in Rule
144(e)(1) of the Securities Act.
As used herein, "Restricted Period" means the period commencing
on the Closing Date and ending on the first
anniversary of the Closing Date. The
foregoing restrictions shall apply
notwithstanding registration of the Shares
pursuant to the registration rights set
forth in Section 9.5 hereof.
It is understood that (i) the Shares held in escrow pursuant to
the Escrow Agreement shall be subject to
the foregoing restrictions; and (ii)
any of the Shares may be released in whole
or in part from the terms hereof upon
the approval of the board of directors of
the Company.
(d) The certificates representing the Shares delivered pursuant to
this
Section 1.2, shall bear legends in
substantially the following form:
"The
securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities
may not be sold, transferred or assigned in the absence of an
effective
registration statement for the securities under said Act, or an
opinion
of counsel, in form, substance and scope reasonably acceptable to
the
Company, that registration is not required under said Act or
unless
sold pursuant to Rule 144 under said Act."
"The securities represented by this certificate are subject to
additional restrictions on transfer to which any transferee agrees
by
his acceptance hereof, as set forth in the Asset Purchase
Agreement
dated as of December __, 2005. No transfer will be made on the
books of
the Company unless accompanied by evidence of compliance with the
terms
of such agreement and by an agreement of transferee to be bound by
the
restrictions set forth in the Agreement. The Company will mail a
copy
of such transfer restrictions to the holder hereof without charge
after
the Company's receipt of a written request therefor."
1.3
Assumed Liabilities.
(a) Purchaser shall, at the Closing, irrevocably and
absolutely,
assume, pay or otherwise discharge only the
obligations and liabilities of
Seller (i) relating to the Assumed
Contracts (excluding any liabilities set
forth in Section 1.3(b)); provided that any
liabilities relating to the Assumed
Contracts that are outstanding as of the
Closing Date must be set forth on
Schedule 2.1 hereto as liabilities to be
assumed, as updated from time to time
between signing and Closing; and (ii) that
are certain specified additional
liabilities of Seller (the "Assumed
Additional Liabilities"). The Assumed
Contracts and the Assumed Additional
Liabilities are collectively referred to
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herein as the "Assumed Liabilities" and are
set forth on Schedule 2.1 hereto.
Notwithstanding the foregoing, Purchaser's
obligations hereunder with respect to
amounts due and owing by Seller to certain
individuals as noted on Schedule 2.1
shall be settled by the issuance by the
Company to each such individual of that
number of shares of Company Common Stock
equal to the quotient of the amount of
such liability divided by the Fair Market
Value of one share of Company Common
Stock on the date immediately preceding the
earlier of the first announcement of
the transactions contemplated by this
Agreement or the Closing Date.
(b) Purchaser shall not assume or pay and Seller shall continue
to
be responsible for any debt, obligation or
liability, of any kind or nature
(fixed or contingent, known or unknown) of
Seller whether or not relating to the
Business, not expressly assumed by
Purchaser pursuant to Section 1.3(a) (the
"Excluded Liabilities"), including without
limitation: (i) except and to the
extent set forth in Section 1.5 or Schedule
2.1, any liability for Taxes,
including (A) any Taxes arising as a result
of Seller's ownership of the
Purchased Assets prior to the Closing Date,
(B) any income Taxes that will arise
as a result of the sale of the Assets
pursuant to this Agreement, (C) any
deferred Taxes of any nature, but excluding
Purchaser's obligation to pay all
Transfer Taxes; (ii) except as set forth on
Schedule 2.1, any liability under
any Contract that is not an Assumed
Contract; (iii) except and to the extent set
forth on Schedule 2.1, any liability of
Seller to any Seller shareholder or
Affiliate of Seller or any Seller
shareholder; (iv) any liability to distribute
to any of Seller's shareholders, warrant
holders or option holders or otherwise
apply all or any part of the Consideration
received hereunder; (v) any liability
arising out of or resulting from Seller's
compliance or noncompliance with any
judgment, order, award or decree of any
foreign, federal, state, local or other
court or tribunal, or Authority and any
award in any arbitration proceeding of
any Authority; (vi) any liability relating
to the compensation arrangements set
forth in Schedules 3.12 and 3.13; and (vii)
any liability of Seller based upon
Seller's acts or omissions occurring after
the Closing Date.
1.4
Retained Assets. Seller shall not sell, transfer, convey or deliver
to
Purchaser, and Purchaser shall not purchase
from Seller the assets, properties,
interests and rights of Seller set forth on
Schedule 1.4 (the "Retained
Assets").
1.5 Transfer
Taxes. Purchaser shall pay all transfer, sales, purchase, use,
value added, excise or similar Tax arising
out of the transfer of any of the
Purchased Assets from Seller to
Purchaser.
ARTICLE II
DEFINITIONS
2.1 Definitions. As used
herein, the following terms shall have the
meanings ascribed to them in this Section
2.1:
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Accounts Receivable. All present and future rights to payment
for
goods or services rendered whether or not
earned by performance, including,
without limitation, all accounts or notes
receivable owned or held by Seller.
Affiliate. As set forth in Rule 12b-2 of the general rules and
regulations under the Securities Exchange
Act of 1934, as amended.
Agreement. This Asset Purchase Agreement, together with all
Exhibits
and Schedules referred to herein, as
amended, modified or supplemented from time
to time in accordance with the terms
hereof.
Assumed Additional Liabilities. Liabilities listed on Schedule
2.1
hereto.
Assumed Contracts. Contracts listed on Schedule 2.1.
Assumed Liabilities. The Assumed Contracts and the Assumed
Additional Liabilities.
Authority. Any governmental, regulatory or administrative body,
agency or authority, any court or judicial
authority, any arbitrator or any
public, private or industry regulatory
authority, whether foreign, federal,
state or local.
Business. As defined in the Recitals hereto.
Business Day. Any day other than a Saturday, Sunday or a day on
which banks in New York are not open for
business.
Closing. The actual sale, conveyance, transfer, assignment and
delivery of the Purchased Assets to
Purchaser.
Closing Date.
The date which is the
later of: (a) fifteen (15)
days following the execution of this Agreement or (b) three (3)
Business
Days following the date on which all
closing conditions have been satisfied or
waived, or such other date as the Parties
may mutually agree in writing, and
upon which the Closing shall occur.
Code. Internal Revenue Code of 1986, as it may be amended from
time
to time.
Company Common Stock. The common stock, $.001 par value of Phase
III
Medical, Inc.
Consideration. As defined in Section 1.2.
Contracts. All contracts, leases, subleases, arrangements,
commitments and other agreements of Seller
relating to the Business or Purchased
Assets, including, without limitation, all
customer agreements, vendor
agreements, purchase orders, installation
and maintenance agreements, computer
software licenses, hardware lease
or rental agreements.
Employee Benefit Plan. Any employee benefit plan within the
meaning
of Section 3(3) of ERISA which (a) is
maintained for employees of Seller or any
of its ERISA Affiliates or (b) has at any
time within the preceding six (6)
years been maintained for employees of
Seller or any current or former ERISA
Affiliates, and any bonus or other
incentive compensation, deferred
compensation, salary continuation, sick or
disability pay, severance, stock
award, stock option, stock purchase,
tuition assistance, vacation, vacation pay
or other benefit plan or arrangement, and
each employment, termination or other
compensation arrangement or agreement, in
each case with respect to current or
former employees or consultants of or to
Seller or any ERISA Affiliate, and
under which Seller or any ERISA Affiliate
could reasonably be expected to have
any liability.
Employment Agreements. As defined in Section 6.1.
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Equipment and Improvements. All facilities and structures,
buildings, installations, fixtures,
improvements, betterments, additions,
laboratory equipment, spare parts, stores,
supplies, fuel and lubes, machinery,
equipment, cranes, forklifts, platforms,
vehicles, trucks, chassis, generators,
containers, spare tires and parts, tools,
appliances, furniture, office
furniture, fixtures, office supplies and
office equipment, computers, computer
terminals and printers, computer software,
telephone systems, telecopiers and
photocopiers, and other tangible personal
property of every kind and
description, which are owned or leased by
Seller, or are utilized in connection
with Seller's operation of the
Business.
ERISA. The Employee Retirement Income Security Act of 1974, as
it
may be amended from time to time, and the
regulations promulgated thereunder.
ERISA Affiliate. Any corporation, partnership or trade or
business
which is a member of a group that includes
Seller and is treated as a single
employer within the meaning of Section
414(b), (c), (m) or (o) of the Code.
Escrow Agent. As defined in Section 1.2.
Escrow Agreement. As defined in Section 10.11.
Escrow Amount. As
defined in Section 10.12.
Exchange Act. The
Securities Exchange Act of 1934, as amended.
Excluded Liabilities. As defined in Section 1.3.
Fair Market Value. Fair Market Value of one share of Company
Common
Stock shall mean the average closing price
(the "Price") of one share of Company
Common Stock on the National Association of
Securities Dealers, Inc.
Over-the-Counter Bulletin Board (the
"Bulletin Board") (or other similar
exchange or association on which the
Company Common Stock is then listed or
quoted) for the five (5) consecutive
trading days immediately preceding the date
for which such Fair Market Value is being
determined. If the Company Common
Stock is not then quoted on the Bulletin
Board or otherwise listed or quoted on
an exchange or association, the Price shall
be the fair market value of one
share of Company Common Stock as of the
date for which such Fair Market Value is
being determined as determined in good
faith by the Board of Directors of the
Company.
FDA. The Federal Food and Drug Administration.
Financial Statements. The financial statements of Seller for
the
fiscal years ended on December 31, 2004 ,
2003, 2002, together with the notes
thereto
Food and Drug Laws. The Federal Food, Drug, and Cosmetic Act of
1938, as amended, and all similar state,
local, and foreign laws or ordinances.
GAAP. Generally accepted accounting principles.
Indemnified Party. As defined in Section 10.6.
Indemnifying Party. As defined in Section 10.6.
IRS. Internal Revenue Service.
Law. Any law, statute, regulation, rule, ordinance,
requirement,
announcement or other binding action or requirement of an
Authority.
Leased Real Property. The parcels of land more fully described
on
Schedule 3.6 under the heading "Leased Real
Property," together with all rights
and privileges under such leases
(hereinafter referred to collectively as the
"Real Property Leases") to the real
property subject to such leases.
Legal Provisions. As defined in Section 3.1.
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Lien. Any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit
arrangement, encumbrance or preference,
priority or security agreement or
preferential arrangement of any kind or nature
whatsoever (including, without limitation,
the interest of a vendor or lessor
under any conditional sale, capitalized
lease or other title retention
agreement).
Most Recent Balance Sheet. The balance sheet of Seller dated
September 30, 2005.
Most
Recent Balance Sheet Date. September 30, 2005.
Non-Competition Agreement. As defined in Section 6.3.
Order. Any decree, order, judgment, writ, award, injunction,
stipulation or consent of or by an
Authority.
Ordinary Course of Business. The ordinary course of business of
Seller, in accordance with past custom and
practice (including, without
limitation, with respect to quantity and
frequency).
Parties. Phase III Medical, Inc., Phase III Medical Holding
Company
and NeoStem, Inc. Pending Claims. As
defined in Section 10.12.
Pension Plan. At any time an employee pension benefit plan that
is
covered by Title IV of ERISA or subject to
the minimum funding standards under
Section 412 of the Code and is maintained
either: (i) by Seller or any ERISA
Affiliate or (ii) pursuant to a collective
bargaining agreement or any other
arrangement under which more than one
employer makes contributions and, with
respect to either (i) or (ii), Seller or
any ERISA Affiliate is then making or
accruing an obligation to make
contributions or has within the preceding six (6)
plan years made contributions.
Permits. As defined in Section 3.19.
Person. Any natural person, corporation, limited liability
company,
partnership, firm, joint venture,
joint-stock company, trust, association,
unincorporated entity or organization of
any kind, Authority or other entity of
any kind.
Purchase Price. As defined in Section 1.2.
Purchased Assets. The Business and all assets, rights and
properties
owned by Seller on the Closing Date
relating to the Business, whether or not
carried and reflected on the books of
Seller (excluding the Retained Assets),
including, but not limited to, the
following:
(a) all deposits (including, without limitation, deposits on
capital
expenditures) and prepaid expenses under Assumed Contracts;
(b) all inventories;
(c) the Equipment and Improvements;
(d) the Real Property Leases;
(e) the Assumed Contracts and all Accounts Receivable relating
thereto;
(f) all intellectual property, including but not limited to the
following: all trade names (including the
name "NeoStem" and any similar names
used by Seller), trademarks, trademark
registrations, trademark applications,
service marks, service mark registrations,
service mark applications; all
copyrights, copyright registrations,
copyright applications; all patent rights
(including, without limitation, issued
patents, applications, divisions,
continuations and continuations-in-part,
reissues, patents of addition, utility
models and inventors' certificates); all
licenses with respect to any of the
foregoing; all trade secrets, proprietary
manufacturing information and
know-how; all inventions, inventors' notes,
drawings and designs; and, all
customer and vendor lists and the goodwill
associated with any of the foregoing;
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(g) any Permits and licenses of Seller to the extent any of the
same
are transferable or assignable to
Purchaser;
(h) choses in action, claims and causes of action or rights of
recovery or set-off of every kind and
character, in each case only to the extent
related to the Purchased Assets or the
Assumed Liabilities;
(i) all of Seller's files, papers, documents and records relating
to
the Business, and all other miscellaneous
assets of Seller relating to the
Business wherever located, including,
without limitation, Seller's website,
credit, sales and accounting records, price
sheets, catalogues and sales
literature, books, processes, formulae,
manufacturing data, advertising
material, stationery, office supplies,
forms, catalogues, manuals,
correspondence, production records,
employment records and any other information
reduced to writing relating to the Business
of Seller;
(j) all rights with respect to the stem cells under the
customer
stem cell storage contracts identified on
Schedule 2.1; and
(k) the Business of Seller as a going concern.
Anything to the contrary notwithstanding,
neither the term "Purchased Assets"
nor any of the defined asset groups
nominally comprising "Purchased Assets"
shall include any asset specifically
referred to in Section 1.4 above; provided,
however, that for purposes of this
Agreement, the term "Purchased Assets" shall
mean all of the goodwill, assets,
properties and rights of every nature, kind
and description, whether tangible or
intangible, real, personal or mixed,
wherever located and whether or not carried
or reflected on the books and
records of the Seller, which are used in,
or which were acquired in connection
with, the operation of the Business,
excepting only the Retained Assets and any
of the above which relate exclusively to
the Retained Assets.
Purchaser. As defined in the heading hereto.
Purchaser Losses. As defined in Section 10.2.
Real Property. The Leased Real Property.
Real Property Leases. As defined in the definition of Leased
Real
Property.
Resolved Claims. As defined in Section 10.11.
Retained Assets. As defined in Section 1.4.
SEC. Securities and Exchange Commission. Securities Act. The
Securities Act of 1933, as amended. Seller. As defined in the
heading hereto.
Stem Cell Insurance. As defined in Section 6.1(q)
Subsidiary. A Subsidiary of any Person means (i) a corporation
more
than 50% of the combined voting power of
the outstanding stock of which is
owned, directly or indirectly, by such
Person or by one or more other
Subsidiaries of such Person or by such
Person and one or more Subsidiaries
thereof, or (ii) any other Person (other
than a corporation) in which such
Person, or one or more other Subsidiaries
of such Person or such Person and one
or more other Subsidiaries thereof,
directly or indirectly, has the power to
direct the policies, management and affairs
thereof.
Taxes. As defined in Section 3.17.
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Tax Return. Any return, report or similar statement required to
be
filed with respect to any Taxes (including
any attached schedules), including,
without limitation, any information return,
claim for refund, amended return and
declaration of estimated Tax.
Third-Party Claim. As
defined in Section 10.6.
Third-Party Notice. As
defined in Section 10.6.
Time Covenant. As
defined in Section 5.8.
Uncontested Claims. As defined in Section 10.12.
2.3
Interpretation. Unless otherwise expressly provided or unless
the
context requires otherwise, (a) all
references in this Agreement to Articles,
Sections, Schedules and Exhibits shall mean
and refer to Articles, Sections,
Schedules and Exhibits of this Agreement;
(b) all references to statutes and
related regulations shall include all
amendments of the same and any successor
or replacement statutes and regulations;
(c) words using the singular or plural
number also shall include the plural and
singular number, respectively; (d)
references to "hereof," "herein," "hereby"
and similar terms shall refer to this
entire Agreement (including the Schedules
and Exhibits hereto); and (e)
references to any Person shall be deemed to
mean and include the successors and
permitted assigns of such Person (or, in
the case of an Authority, Persons
succeeding to the relevant functions of
such Person).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser and Company
to enter into and perform this
Agreement, and in consideration of the
covenants of Purchaser and Company
contained herein, Seller represents and
warrants to Purchaser and Company (which
representations and warranties shall
survive the Closing (subject to Section
10.1) regardless of any examinations,
inspections, audits and other
investigations Purchaser and Company have
heretofore made, or may hereafter
make, with respect to such representations
and warranties) as follows:
3.1
Status of
Seller; Enforceability; Conflicts; Consents.
(a) Except as set forth on Schedule 3.1, Seller is a
corporation
duly organized, validly existing and in
good standing under the laws of the
State of California. Except as set forth on
Schedule 3.1, Seller has full
corporate power and authority and possesses
all governmental franchises,
licenses, permits, authorizations and
approvals necessary to enable it to use
its name and to own, lease or otherwise
hold its properties and assets and to
carry on its business as presently
conducted, except where the failure to
possess any such franchise, license,
permit, authorization or approval would not
have a material adverse effect on Seller or
the Business. Seller is duly
qualified and in good standing to do
business in each jurisdiction in which the
nature of its business or the ownership,
leasing or holding of its properties
makes such qualification necessary, except
where the failure to be so duly
qualified and in good standing would not
have a material adverse effect on
Seller or the Business. Seller has no
Subsidiaries.
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(b) Seller has the requisite power and authority to execute and
deliver this Agreement and to perform its
obligations hereunder. The execution
and delivery by Seller of this Agreement,
and the performance by Seller of its
obligations hereunder, have been duly and
validly authorized and approved by all
necessary action on the part of Seller,
except as set forth on Schedule 3.18.
(c) This Agreement is binding upon, and enforceable against,
Seller
in accordance with its terms subject, as to
enforcement, to bankruptcy,
insolvency, reorganization and other laws
affecting creditors' rights generally
and by principles of equity (whether in a
proceeding at law or in equity).
(d) Except as set forth on Schedule 3.1, neither the execution
nor
delivery of this Agreement by Seller nor
the performance by Seller of its
obligations under this Agreement will
(assuming the receipt of all consents and
approvals referred to in Schedule 3.18),
conflict with or result in a breach of
any of the terms or provisions of, or
constitute a default under, any contract,
lease, license, franchise, permit,
indenture, mortgage, deed of trust, note
agreement or other agreement or instrument
to which Seller is a party or is
bound or any judgment, order or decree,
statute, law, ordinance, rule or
regulation applicable to Seller or the
property or assets of Seller (including,
without limitation, the Purchased Assets)
or the articles of incorporation or
by-laws of Seller, or any applicable Law or
Order (collectively, "Legal
Provisions"), except for conflicts,
breaches or defaults which would not have a
material adverse effect on Seller or the
Business.
(e) No consent, approval, license, Permit, Order or
authorization
of, or registration, declaration or filing
with, any court, administrative
agency or commission or other governmental
authority or instrumentality,
domestic or foreign, is required to be
obtained or made by or with respect to
Seller in connection with (i) the execution
and delivery of this Agreement or
the consummation of the transactions
contemplated hereby, or (ii) the conduct by
Seller of its business following the
Closing as conducted on the date hereof
other than those that have already been
obtained and (A) the consents and
approvals referred to in Schedule 3.18, (B)
those that may be required solely by
reason of Purchaser's (as opposed to any
other third party's) participation in
the transactions contemplated hereby, and
(C) such other consents or approvals
the failure of which to obtain would not
have a material adverse effect on
Purchaser or the ability of any party to
consummate the transactions
contemplated hereby.
(f) Seller has delivered to Purchaser true and complete copies
of
its articles of incorporation and by-laws,
as amended to date.
3.2
Ownership of
Seller.
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(a) Based on Seller's books and records, the sole shareholders
of
Seller are the Persons set forth on
Schedule 3.2 and each such shareholder is
the registered owner of the number of
shares set forth opposite such Person's
name.
(b) Based on Seller's books and records, except as set forth on
Schedule 3.2, there are no outstanding
warrants, options, agreements,
convertible or exchangeable securities,
phantom stock, or other commitments
pursuant to which Seller is or may become
obligated to issue or sell any shares
of capital stock or other securities of
Seller.
3.3
Financial Statements. The Financial Statements and the
financial
statements for the nine months ended
September 30, 2005 have been prepared in
accordance with GAAP, consistently applied
during the periods covered thereby,
fairly present in all material respects the
financial condition and the results
of operations for the periods covered
thereby, and are in accordance with the
books and records of Seller. Seller has
provided Purchaser with the Financial
Statements and the Most Recent Balance
Sheet.
3.4
Undisclosed Liabilities. On the Most Recent Balance Sheet Date,
Seller
had no debts, liabilities, Liens, claims,
encumbrances or other obligations of
any nature (whether accrued, absolute,
contingent or otherwise) which were not
disclosed, reflected or reserved against on
the Financial Statements or the Most
Recent Balance Sheet; and, except for
liabilities disclosed on Schedule 3.4
which have been incurred since the Most
Recent Balance Sheet Date, since the
Most Recent Balance Sheet Date Seller has
not incurred any liability of any
nature (whether accrued, absolute,
contingent or otherwise).
3.5 Title
to Properties. Except as set forth on Schedule 3.5, Seller has
good and marketable title to all of the
assets and properties reflected on the
Most Recent Balance Sheet or used in the
Business constituting Purchased Assets
free and clear of all Liens of any nature,
except for (a) Liens for current
taxes not yet due and payable and (b) minor
Liens or other encumbrances which
will not materially impair the value or
utility of any material component of the
Purchased Assets from and after the Closing
or Seller's ability to consummate
the transactions contemplated herein.
3.6 Real
Property. Schedule 3.6 contains accurate descriptions of each
parcel of Real Property leased or occupied
by Seller. No other Real Property is
used in the Business or occupied by Seller.
The Seller owns no real property.
Except as set forth on Schedule 3.6, all of
the Real Property Leases are valid
and in full force and effect, and there
does not exist any default or event that
with notice or lapse of time, or both,
would constitute a default by Seller
under any of the Real Property Leases, and
to the knowledge of Seller, there
does not exist any default or event that
with notice or lapse of time, or both,
would constitute a default by any other
party under any of the Real Property
Leases.
3.7
Equipment and Improvements. Except as set forth on Schedule 3.7,
to
the best of Seller's knowledge, the
Equipment and Improvements located on the
Real Property are in compliance with all
applicable Laws and Orders, and are in
reasonable and serviceable condition and
repair, normal wear and tear excepted,
except for any such non-compliance which
would not have a material adverse
effect on Seller or the Business. To the
best of Seller's knowledge, neither the
Real Property nor the use or occupancy
thereof by Seller violates in any way any
applicable Laws, Orders, Permits,
covenants, conditions and restrictions,
whether federal, state, local or, to
Seller's knowledge, private, except for any
such violation which would not have a
material adverse effect on Seller or the
Business.
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3.8
Contracts.
(a) Schedule 3.8 to this Agreement contains a complete list of
all
material Contracts (including, without
limitation, all Assumed Contracts)
entered into or agreed to by Seller or by
which Seller is currently bound and
true and complete copies of such written
Contracts have been provided to
Purchaser or its counsel. Identified with
an asterisk on Schedule 3.8 are those
Assumed Contracts which contain a
prohibition on assignment. All Assumed
Contracts are valid and binding upon
Seller, and to Seller's knowledge, the
other parties thereto except as limited by
bankruptcy and insolvency laws and by
other laws affecting the rights of
creditors generally. Except as set forth on
Schedule 3.8, there is no default or event
that with notice or lapse of time, or
both, would constitute a default by Seller
under any of such Assumed Contracts,
and to the knowledge of Seller, there is no
default or event that with notice or
lapse of time, or both, would constitute a
default by any other party under any
of such Assumed Contracts. Except as set
forth on Schedule 3.8, Seller has not
received notice that any party to any of
such Assumed Contracts intends to
cancel or terminate any of such agreements
or to exercise or not exercise any
options under any of such agreements.
(b) Except as set forth on Schedule 3.8, the Assumed Contracts
are
adequate and appropriate for the continued
conduct of the Business as conducted
in the Ordinary Course of Business.
3.9 Equity
Interests. Except as set forth on Schedule 3.9, Seller does not
directly or indirectly own any capital
stock of, or other equity interests in,
any corporation, partnership, joint venture
or other entity.
3.10
Intellectual Property. Schedule 3.10 contains a true and
complete
list and brief description of all patents,
trademarks, service marks, trade
names, and copyrights (whether or not such
trademarks, trade names, service
marks and copyrights are registered), and
all pending applications therefor, if
any, owned by Seller or in which Seller has
any rights or licenses. No other
patents, trademarks, trade names, service
marks or copyrights are reasonably
necessary for the conduct of the Business
in substantially the same manner as
presently operated by Seller. To Seller's
knowledge, there is no infringement or
alleged infringement by any Person of any
such trademark, service mark, trade
name, copyright or patent. Seller has not
received any notice from any Person
alleging Seller is infringing upon, and, to
Seller's knowledge, Seller has not
infringed and is not now infringing on, any
trademark, service mark, trade name,
copyright or patent belonging to any other
Person. Schedule 3.10 also contains a
true and complete list of all agreements
between each employee of Seller and
Seller relating to confidential information
of Seller, including but not limited
to patents, trademarks, service marks,
trade names, and copyrights, and the
ownership of any intellectual property
developed by such employee under the
scope of his employment.
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3.11
Required Assets; Sufficiency of Assets. Except as set forth on
Schedule 3.11, (a) there are no significant
assets used or required by Seller in
the conduct of the Business as presently
conducted by Seller that are not either
owned by it or licensed or leased to it
and, in each case conveyed to Purchaser
under this Agreement, and (b) the Purchased
Assets constitute all of the assets,
goodwill, properties and rights of every
nature, kind and description, whether
tangible or intangible, real, personal or
mixed, necessary to conduct the
Business in substantially the same manner
as presently conducted by Seller.
3.12
Personnel Identification and Compensation. Schedule 3.12 contains
a
true and complete list of the names, titles
and compensation of all current
officers, directors and employees of
Seller.
3.13
Existing Employment Related Contracts. Schedule 3.13 contains a
list
of all written and oral (with a short
description thereof) arrangements or
contracts relating to employment,
compensation, bonuses, severance, pension and
other related issues and collective
bargaining agreements to which Seller is a
party or by which Seller is bound. All
these contracts and arrangements are in
full force and effect, and neither Seller
nor, to Seller's knowledge, any other
Person is in default under any such
contract or arrangement. There have been no
claims of default and there are no facts or
conditions which, with the passage
of time or upon notice, will result in a
default by Seller, or to the knowledge
of Seller, any other Person, under these
contracts or arrangements. There is no
pending or, to Seller's knowledge,
threatened labor dispute, strike, or work
stoppage affecting Seller or the
Business.
3.14
Compliance with Laws. Except as set forth in Schedule 3.14,
Seller
and the Purchased Assets have complied with
all, and are not in violation of
any, applicable Laws, Permits and Orders
(including, without limitation, any
applicable building, zoning, environmental
protection, water use, Food and Drug
Laws and related regulations, occupational
health and safety, employment,
disability rights or food service
facilities law, ordinance, or regulation)
affecting Seller's properties, the
operation of the Business, or the Purchased
Assets, except for any such non-compliance
or violation which would not have a
material adverse effect on Seller or the
Business. No material capital
expenditures are required for compliance
with Laws by Seller in order to conduct
the Business as presently conducted by
Seller.
3.15
Claims and Legal Proceedings. Except as set forth in Schedule
3.15,
there is no claim, action, suit,
arbitration, criminal or civil investigation or
proceeding pending or involving or, to the
knowledge of Seller, threatened
against Seller before or by any court or
governmental or nongovernmental
department, commission, board, bureau,
agency or instrumentality, or any other
Person, affecting Seller or the Business or
that questions the validity of this
Agreement or any action taken or to be
taken Seller pursuant to this Agreement
or in connection with the transactions
contemplated hereby.
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3.16
Employee Benefit
Plans.
(a) Schedule 3.16 contains a true and complete list of all
Employee
Benefit Plans.
(b) Except as set forth on Schedule 2.1, all obligations of any
nature under any Employee Benefit Plan will
constitute a Retained Liability, and
Purchaser shall have no obligation or duty
with respect thereto.
3.17
Tax Matters.
(a) The term "Taxes" means all net income, capital gains, gross
income, gross receipts, sales, use,
transfer, ad valorem, franchise, profits,
license, capital, withholding, payroll,
employment, excise, goods and services,
severance, stamp, occupation, premium,
property, assessments, or other
governmental charges of any kind
whatsoever, together with any interest, fines
and any penalties, additions to tax
